G has an asset beta of 1.5. The risk-free interest rate is 6%, and the market risk premium is 8%. Assume the capital asset pricing model is correct. G pays taxes at a marginal rate of 35%.

Draw a graph plotting Gs cost of equity and after-tax WACC as a function of its debt-to-equity ratio D/E,from no debt to D/E = 1.0.

Assume that Gs debt is risk-free up to D/E = .25. Then the interest rate increases to 6.5% atD/E = .5, 7% at D/E = .8, and 8% at D/E = 1.0.

You can assume that the firms overall beta (B_A) is not affected by its capital structure or the taxes saved because debt interest is tax-deductible.

PLEASE SHOW ALL CALCULATIONS. Im new to financing.